Canada’s government should be ready to counter any further weakening of economic growth, which easily could occur, the International Monetary Fund says in its latest assessment of the global economy.

The Washington-based IMF shaved its forecasts for this year and 2015 slightly, reflecting the stumbles of a number of bigger emerging-market economies, including Russia, which is dealing with sanctions and capital flight because of its decision to claim the Ukrainian region of Crimea.

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Despite the modest downgrade, the tone of the fund’s spring World Economic Outlook is cautiously optimistic, mostly because of the resilience of the U.S., which is poised for its strongest economic growth since before the recession.

Faster growth in the United States should be good for Canada, as the U.S. is Canada’s largest export market. Yet the U.S. recovery is only good, not great. Exports will be stronger, but perhaps not as strong as they could be were Canada’s economy more competitive, the fund says. Growth in Canada still is too reliant on consumer spending and housing, both of which will be restrained by rising household debt levels.

“Although external demand could surprise to the upside, downside risks to the outlook still dominate,” the IMF says of Canada. “Fiscal policy needs to strike the right balance between supporting growth and rebuilding fiscal buffers, especially at the federal government level, with less room to maneuver at the provincial level.”

Canada stood out among its peers in the immediate aftermath of the financial crisis, as the combination of a stable banking system, extraordinarily low interest rates and a big short-term boost in government spending put the economy back on its feet.

But the country has struggled lately to retain its status as global standout.

Canada’s gross domestic product will expand 2.3 per cent this year, slower than Britain’s 2.9-per-cent rate and 2.8 per cent in the United States. Canada will trail its fellow Anglo-Saxon economies in 2015, too, the IMF predicts.

Global GDP will advance 3.6 per cent this year, compared with an estimate of 3.7 per cent in June and a 3-per-cent gain in 2013. That would be the strongest annual growth since 2010, when the world economy rebounded from a deep recession in 2009.

Prime Minister Stephen Harper’s post-recession priority has been erasing the budget deficit his government acquired fighting the financial crisis. Even as Canada’s economy lost its vigour, Mr. Harper insisted the budget must be rebalanced.

“We worked too hard to return to a balanced budget to throw it all away,” Finance Minister Joe Oliver told an audience in Toronto Monday. “So do not expect a big stimulus program.”

The IMF is less categorical. Its message: balancing the budget is fine so long as economic growth holds at about 2 per cent, but be flexible if circumstances change.

That’s because the federal government has the most room to manoeuvre. The push to erase the deficit is more a political imperative than an economic one: a small deficit would have little effect on the broader economy, while a bit of spending or the right tax cut could stoke enough demand to get the country’s economy through a soft patch.

The onus is on the federal government because the Bank of Canada already has set interest rates extremely low, and households are weighed down by debt. Weaker commodity prices will hurt corporate profits, and could curb business investment.

Mr. Oliver did say Monday that the government intends to put any budget surplus in the years ahead toward “tax relief for hard working Canadian families.”

The U.S. and Britain are the stars of the IMF’s most recent economic outlook. The U.S. is firmly re-established as the global economy’s main engine, as emerging markets such as China struggle to generate domestic demand. Britain was one of the few countries that got a significant upgrade, as its 2013 forecast was bumped up from 2.5 per cent in June.

Fund officials were less than enthusiastic about Europe’s prospects. Germany and Spain are doing better, but the IMF went out of its way to express its worry over chronically low inflation. The fund called on the European Central Bank to take steps to lift prices “now.”

After powering the global economy out of the recession in 2009, emerging markets now are anchors on growth. The IMF cut its forecast for economic growth in Russia this year to 1.3 per cent from 1.9 per cent. Brazil, South Africa and Turkey also came in for big downward revisions for idiosyncratic reasons that nonetheless had a common thread: shoddy governance and poor policy decisions.

“Growth in emerging market economies is projected to pick up only modestly,” the IMF says in its outlook. “These economies are adjusting to a more difficult external financial environment in which international investors are more sensitive to policy weakness and vulnerabilities given prospects for better growth and monetary policy normalization in some advanced economies.”

Overall, emerging-market and developing economies will expand 4.9 per cent in 2013 and 5.3 per cent in 2015, compared with 4.7 per cent last year, the IMF said. China, the world’s second-largest economy after the U.S., will post growth rates of about 7.5 per cent this year and next, slightly slower than in 2013, but about what the IMF predicted in June.

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